This arrangement, while facilitating a $4.3 billion increase in support to India, is designed to maintain International Bank for Reconstruction and Development's (IBRD) - which is its lending arm - net exposure within the limit of $17.5 billion established by it.
In a statement, the World Bank said the new arrangement will allow for special bonds to be issued by the World Bank and purchased by India, to offset additional planned lending.
This will enable India to continue accessing long-term, low-interest IBRD finance for development projects aimed at improving the lives of its people, one third of whom are yet to make their way out of poverty.
"Without taking this action, it would have been difficult for the Bank to assist India meaningfully as it tackles the remaining large challenges of lifting some 300 million out of poverty," said WB vice president for South Asia Isabel Guerrero.
"This new arrangement will work towards supporting India's development needs, showing the Bank can be innovative, flexible and responsive to the differentiated needs of our client countries," she said in a statement.
The Bank said like other emerging economies, India is faced with the challenge of removing bottlenecks in infrastructure and human skill development that can constrain its ability to sustain non-inflationary, rapid and inclusive growth.
In line with its aim to support India's development goals, the World Bank has nearly 80 active projects in India, with several large projects in the critical area of infrastructure.